Pediapharm Announces Global Exclusive Licensing Agreement for Relaxa®, an Established Canadian Product With Existing Revenues

MONTREAL, QUEBEC--(Marketwired - Sept. 19, 2016) -

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Pediapharm Inc. (the "Company" or "Pediapharm")(TSX VENTURE:PDP) is pleased to announce it has signed an exclusive licensing agreement (the "Licensing Agreement") with a company owned by Mr. Gerard Leduc (the "Licensor"), a globally known pharmaceutical executive for drug product Relaxa® (the "Product"). Under the terms of the Licensing Agreement, Pediapharm has the exclusive right to manufacture, promote, market, sell and distribute the Product globally. In return, Pediapharm will pay the Licensor royalties based on annual net sales of the Product.

Pursuant to the terms of the Licensing Agreement, Pediapharm has the right to acquire the Product at any time until the seventh anniversary of the effective date of the Licensing Agreement. The aggregate price payable for the Product during such term shall be five million dollars ($5,000,000) plus a two percent (2%) royalty on the annual net sales of the Product up to a maximum of one million five hundred thousand dollars ($1,500,000) (the "Option Exercise Price"). Moreover, for the term commencing on the fifth anniversary of the effective date of the Licensing Agreement and ending on seventh anniversary of the effective date of the licensing agreement, the Licensor will have the option to sell the Product to Pediapharm for the same Option Exercise Price.

Relaxa®, a PEG 3350 based product, is used for the treatment of occasional constipation. The prevalence of constipation exceeds that of frequently reported conditions such as migraines, asthma, diabetes and coronary heart disease (1). Although more common in the elderly, it is a prevailing condition in children where constipation accounts for almost 5% of pediatric visits (2). Of all products used to treat constipation, the PEG 3350 based products are the fastest growing now that they are becoming the standard of care.

The Canadian Pediatric Society (the "CPS") guidance supports PEG 3350 as first line in acute and chronic constipation management. Furthermore, the CPS states that "PEG 3350 is a safe, effective and well-tolerated long-term treatment for constipation." (1,3)

"Acquiring a product with existing sales has been our focus in the last 12 months. We have been very disciplined, both in terms of financial structures as well as synergies and we are thrilled to have been able to achieve this in a way that it is immediately accretive with no use of our cash, no share dilution and no additional debt", stated Sylvain Chretien, President and Chief Executive Officer of Pediapharm. He added: "Annual sales of Relaxa®, based on the trend of the last 12 months, is approximately $3 million, which will have an immediate impact on our top and bottom line and importantly, Relaxa® has a strategic commercial fit with our signature product, NYDA®. While all existing revenue from Relaxa® is presently generated in Canada, we are also confident to be able to generate additional revenue outside of Canada", concluded Mr. Chretien.

"With this acquisition, we are able to reach our objective to accelerate our growth with an accretive transaction through a very favorable transaction structure", said Benoît Hébert, Pediapharm's Vice-President of Business Development and Licensing. "This provides us with some financial flexibility for our upcoming product launches while providing us with the flexibility to complete the outright acquisition of the product rights if and when needed. This is certainly a transaction structure we hope to replicate in the near future."

About Relaxa®

Relaxa® is a laxative composed of polyethylene glycol 3350 (PEG 3350). It is indicated for the treatment of occasional constipation in adults (≥ 18 years). Relaxa® is available in jars of 510g and in boxes of 30 individual 17g sachets. PEG 3350 has the strongest peer-reviewed medical evidence for short-term and longer-term effectiveness compared to other laxatives. For more information, visit www.relaxa.ca.

About Pediapharm Inc.

Pediapharm is the only Canadian specialty pharmaceutical company dedicated to serving the needs of the pediatric community. Its mission is to bring to the Canadian market the latest innovative pediatric products with the objective to improve the health and the well-being of children in Canada. Since its debut in 2008, Pediapharm has entered into numerous commercial agreements with partners from Canada and other countries around the world. The company's innovative product portfolio includes NYDA®; a breakthrough treatment for head lice; EpiCeram® a non-steroid emulsion for eczema; naproxen suspension, indicated to treat pain and inflammation due to various conditions, including Juvenile Idiopathic Arthritis; rupatadine, a novel prescription antihistamine to be launched in the coming months; and a broad pipeline of products under registration.

FORWARD LOOKING STATEMENTS

This news release contains forward-looking statements and other statements that are not historical. Such forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to vary materially from target results and the results or events predicted in these forward-looking statements. As a result, investors are cautioned not to place undue reliance on these forward-looking statements. Forward looking statements or information in this news release may include, but are not limited to, business plans and expectations, anticipated benefits from the licensing agreement and Pediapharm's expected financial position.

The forward-looking statements contained in this news release are made as of the date of this release. Except as required by applicable law, the Corporation disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking information reflects the current expectations or belief of the Corporation based on information currently available and such information is subject to a number of assumptions, risks and uncertainties described in details at pp. 35 to 41 of the Management Information Circular of Chelsea Acquisition Corporation dated November 12, 2013 available on SEDAR at www.sedar.com and other risks associated with being a specialty pharmaceutical company.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

(1)

Understanding the Prevalence and Impact of Constipation in Canada. A Special Report from the Canadian Digestive Health Foundation. Feb 2014